Tag Archives: profit

Reasons To Set Low Cost Price Of Different Products

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There are various instances where you will find that the companies declare very low prices for their products. It may seem that with such a low price they can hardly achieve any profit; but it is actually not the case. Low prices are mainly set for the purpose of achieving more profit.

These companies very well understand what the customers want and so they set a suitably low rate to force the buyers to reject the high priced product and select the low priced ones. Most of us love to shop around for items that come with heavy discounts no matter what the quality is.

But there should be a certain level of lowering the prices so that it reasonably covers the cost that has been spent in the maintenance, manufacturing and administration of the concerned product. To determine this aspect a calculation is done that is based on the total marginal costing.

It means that the company has already saved itself from going on a loss as it has set the set the price of the item on the basis of an extra unit that actually does not exist. This cost influences only the variable cost. This way one a small profit can add up gradually to help the company to gain more business. From the point of view of economics, marginal cost can be declared as the cost price of producing an extra unit.

There are various resources that the company make use of to help the business to gain worthy capital at the end of the year. But too much of lowering the prices have certain disadvantages too. More profit will result in more demand and it will prompt the business house to utilize the profit money to manufacturer more products. An intention of maintaining profit level will lead to low quality and simultaneously lower demand. So the cost price has to be lowered by maintain a certain level which will make earning profit easier.

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Use the Power of the Collective in New Ways

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It’s become more and more evident that the old models we have for organizations are starting to fail us. We know how much more can be accomplished though the power of a collective effort, and many of us have left traditional corporations due to frustration with the rigid hierarchical model and its inherent inertia. Of course, traditional corporations were designed for shareholder profit as the central priority.

Yet, have you noticed that no matter how noble the goals might be of any other organization you join, sooner or later you find yourself back in the same frustrations you had with traditional corporations? Or, if you’ve decided to take a break from large organizations altogether, then you find yourself facing the isolation and limited impact of a solo entrepreneur.

Without any new models of how to work collectively, we tend to fall back on the familiar hierarchical models and rigid operating principles.

If we are to bring about the change we envision in the world, we must learn to harness the power of group effort without the old baggage. We cannot demand that the world change if we have not changed the way we operate!

Much has been said and done about the need to change our inner world in order to change the outer world, and the next stage of evolution in our society is to change the dynamics of the groups and organizations that we influence. Are you ready to take on that challenge?

Leadership and being an agent of change can take many forms. You might be explicitly directing the projects of others, or you may bring implicit leadership to a situation by proposing a better way to accomplish a shared goal.

One of the shifts that is needed is the shift from “me” to “we,” from competition to cooperation. This applies not only within organizations but between organizations (including solo entrepreneurships) which share a common goal. As we heal the part of ourselves that is still reactive and hungry to be recognized, we can begin operating from a genuine wish for mutual gain.

In the book Tribal Leadership (see Recommended Reading below), Dave Logan and others describe 5 stages which illustrate a natural progression towards a truly collaborative world. These stages can be described as follows:

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Innovation in the Informal Sector

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South Africa is a country where 49% of its population is unemployed. Although apartheid is over the spread of resources and income is still very unbalanced. Wealth lies with either the white middle to upper class or the new up and coming black elite – the Black Diamonds. Unfortunately the large majority of the country lives under the bread line and have to starve, sell drugs, steel, beg or use their innovation to survive. The later is what this article about.

The country is truly confused, it has a good currency that trades under R7 to the US dollar (1st January 2011), a first world infrastructure – yet as mentioned before the large majority is living in poverty. This has lead many a person, normally African to use their intuitive and become street entrepreneurs.

There are several different types of street businesses which make these innovative citizens money and take some strain off of our economy. This article will discuss some of the more prevalent ones.

The first is the street vendor, making on average between R50-R100 per day – they sell lose cigarettes colloquially known as ‘gwais’ either Mega or Stuyvesant which cost R1 and R2 respectively and sweets. After speaking one such vendor called Azor he informed me that he makes a profit of R8 of one sold box of mega and R30 of off Stuyvesant. He sells about 4 boxes of mega a day making a R48 profit, and about one box of Stuyvesant making R30. Furthermore he sells sweets and chips and makes about R20 profit on these a day. On top of this Azor also fixes shoes for R20 on average making about R40 extra in this venture. So from an initial outlay of about R100 he profits R190 on a good day on commodities alone. Azor is also getting his cordless pay phone working which will up his profit. Accommodation is about R800 a month, he works everyday so he makes about R3500-R4000 per month. Azor spends about R500 a month on food meaning he has at least R2200 to spend and buy more supplies clothes and electricity each month. What a wise businessman.

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